Federal Government Attempts To Shine Light On Dark Corners Of Internet

A hotel employee in Charleston, SC made news recently after the U.S. Drug Enforcement Administration seized $814.22 worth of his assets. What’s so amazing about $814.22? The seizure has garnered attention because of the form those assets took, 11.02 Bitcoins.

According to the official announcement by the DEA, the forfeiture marks the first time in U.S. history that a federal agency has seized Bitcoin from a criminal suspect. So why did the forfeiture occur? According to law enforcement officials, 31-year-old Eric Hughes was engaged in some shady online dealings, using an online persona “Casey Jones” to trade drugs and prescription narcotics on a website known as the “Silk Road.” Experts say that the Silk Road functions as an underground marketplace on the anonymous Tor Network, a region of the Internet referred to as the “deep web.”

Despite the seizure, the DEA has yet to formally charge Hughes with any crime. Hughes has so far denied being Casey Jones, saying that he had houseguests who he suspects of using his computer to conduct the nefarious online transactions. The case is the first ever involving seizure of the online currency and many expect it to set an important precedent in how such cases are handled in the future.

So what exactly is a Bitcoin and why do law enforcement officials care in the first place? Bitcoins are a recent invention, an online currency that allows individuals to exchange goods online and in person. Meant to resemble Internet gold, Bitcoins are “mined” electronically, by computers crunching complicated equations to slowly unlock stores of the Bitcoin that are hidden around the web. Experts believe that 21 million Bitcoin exist, its finite number lending to its value. Also like gold, Bitcoins fluctuate in value, often wildly so, with the market shifting rapidly every day. Merchants both online and offline have begun accepting the digital currency, ranging from coffee shops in New York and San Francisco to the dating website OKCupid.

So why do law enforcement authorities care? The problem is that in addition to buying muffins and dating site memberships, Bitcoins are often used to purchase illegal items on the Internet. The currency is seen as facilitating the lawlessness that has taken hold on the deep web, with Bitcoin allowing users to purchase drugs, pills, weapons and even child pornography. Most online financial transactions involve intermediaries, like credit card processing companies, which ensure that any transaction can be tied back to an individual. With Bitcoin, the money is exchanged between individuals and online accounts can be created to shield an individual’s real-world identity.

This anonymity is a large part of the appeal of Bitcoin and is also the reason the DEA and other law enforcement agencies have begun circling, waiting for a chance to pounce and shut it down. Just this year the makers of another online currency, known as Liberty Reserve, were indicted and accused of laundering billions of dollars. Last month a judge in Texas declared Bitcoin to be operating as a “currency… or form of money.” The label is an important one in that it cleared the way for the Securities and Exchange Commission to continue an action against an online, Bitcoin-based hedge fund that regulators say was operating a Ponzi scheme. Other agencies, including the FBI, IRS and Homeland Security are also anxiously awaiting recent cases concerning Bitcoin and are said to be working together to construct an approach for how to handle future cases.

All the recent actions surrounding the digital currency appear to be leading towards important changes. It’s thought that the Justice Department and other branches of the federal government will crack down and insist on a lifting of the current cloak of anonymity that shrouds Bitcoin transactions. Events like the Charleston Bitcoin seizure are likely the opening shots in a battle by law enforcement officials to shed some light on what goes on in the deep, dark web.

Source: Glenn Smith, published at PostandCourier.com.